Strictly speaking Umbrella Companies don't charge a "fee". If they charged a fee then it would be subject to VAT. What they do do though is pass on an administration cost in calculating the profit on your contract. This is called the umbrella company's margin.
An Umbrella Company is an organisation that contractors can join to ease their tax and pay issues.
Since the introduction of IR35 most companies or recruitment agencies that employ the services of contractors have required that they are invoiced for the work performed from a limited company.